Getting Beyond Congestion

The folly of spending huge amounts of money on avoiding transmission congestion and engaging power plants in reliability-must-run contracts instead of investing in new high-voltage lines was highlighted during a July 28-29 California Manufacturers & Technology Association conference. The $1 billion spent on congestion charges last year is quite "the incentive to do better," said Ken Wiseman, California Independent System Operator board chair. Speakers at the two-day conference called for investments in short- and long-distance transmission lines and new, strategically sited power plants. California Energy Commission member John Geesman pointed out that useful small transmission projects have yet to be identified. He insisted that expected congestion be included in the state?s supply projections. "Four years after the crisis?why aren't we forecasting congestion?" he asked. He also noted that there are 8,500 MW of permitted power plants waiting for contracts needed to commence development. The governor's deputy cabinet secretary, Dan Skopec, said the state chief is a big proponent of new transmission to increase reliability. However, "You can't talk about transmission without talking about the Frontier Line," he added. The Frontier Line is a controversial transmission project that would stretch from Wyoming to California. However, skeptics believe it will mean more coal-fired electricity brought into the state. Consultant Barbara Barkovich highlighted how local energy and capacity shortages are wreaking havoc on the market. "All of a sudden competition doesn't work" because of market power, she warned. "From a consumer perspective, it is pretty scary." Imposing price caps, she added, is not an adequate market power mitigation measure because it discourages new generation. She and other industry representatives also stressed the need to build generation near load to help alleviate market power. According to the California Independent System Operator, 25,000 MW of local power is needed. Carolyn Kehrein of Energy Management Services said that 70 percent of the load serves local needs. Representatives from large businesses, investor-owned utilities, independent power producers, and energy agencies agreed on the need for a capacity market to help meet growing demand. The California Public Utilities Commission expects to soon release a framework for developing a capacity market to help utilities meet the requisite 15-17 percent supply cushion. There have been numerous workshops on how a capacity market can meet the state's resource-adequacy mandate, but the issue has been bogged down in complexities ( Circuit , May 27, 2005).

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Getting Beyond Congestion

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